By Edwin Muhumuza
The parliamentary Finance committee has expressed concern as to why Bank of Uganda is making losses , a trend that is affecting the national reserves.
The committee heard that the central bank had invested Uganda’s reserves in Europe ,a move which did not yield any profits following the negative interest rates.
The revelation was made by officials led by Dr. Adam Mugume, Executive Director of Research, at Bank of Uganda while appearing before legislators to account for another 450bn shillings for re-capitalization.
Mugume told the committee that currently Uganda’s reserves have been invested in the United states of America,whose market offers an interest rate of 2%.
This though did not go well with members of the committee chaired by Hon.Paul Musasizi ,Member of Parliament, Rubanda County East Kigezi Sub Region amid concerns stemming from the conservative investment approach of the central bank with eyes on overseas financial markets.
Uganda has reserves now amounting to US $32billion but these could be swept away in a blink of an eye following poor investment decisions, warned the director of research.
During the interface, Amos Lugolobi ,a member of the committee and chair of the budget committee of parliament wondered why the central bank was adding to Uganda’s debt burden with such demands even after over 200bn was advanced to the bank in the previous financial year for re-capitalization.
Among the central bank’s expenses include monitory policy infrastructure, increased use of garnish orders, and high costs of currency infrastructure.
The Auditor General’s report 2018 notes that Uganda’s debt to GDP ratio of 41 per cent is still below the International Monetary Fund (IMF) risky threshold of 50 per cent and compares well with other East African countries. However economic analysts challenge that figure stating that the country is already well above the threshold with estimates at 55% which they say is unfavourable compared to national revenue collected which is the highest in the region at 54 percent”.
Concerns have always been about the sustainability of debt, taking in more commercial loans, whose conditionalities are probably not very conducive for Uganda as a developing country.
Meanwhile Parliament has resolved to have a national dialogue with officials from Bank of Uganda and the ministry of finance about the fate of Uganda’s economy more so over the ever increasing national debt as a result of multi-year programs that need constant funding as well as supplementary expenditure.